Gordon Brown spins on Northern Rock & the Housing Market
Posted on 24 September 2007 by
A good part of Andrew Marr’s interview with the Gordon Brown on BBC1 yesterday morning was given over to the Northern Rock affair. The Prime Minister persistently refused to answer when he personally knew about the problems at Northern Rock. He just waffled about the tripartite committee (Treasury, Bank of England & FSA) meeting regularly.
Marr tried again: “There is a suspicion that the Government knew about this quite a while before everyone else did and if quicker action had been taken you wouldn’t have had those queues outside Northern Rock. Brown simply replied “I don’t accept that at all” but didn’t offer any reason for the delay in taking action.
Marr then followed up with: “We know they got it wrong because we know there was a U turn.” Brown ignored this comment and tried to change the subject by referring to the 80 and 90s and added “we now have low interest rates.”
Now the facts on interest rates instead of the spin: when Brown became Chancellor after the 1997 General Election he inherited a Bank Rate of 6% and so after 10 years as Chancellor the current 5.75% represents a huge decrease of 0.25%!. In the 4 years prior to the 1997 Election Bank Rate had fluctuated relatively narrowly - between 5.25% and 6.75%. In the first 4 years after the election it fluctuated slightly more (5.5% - 7.5%).
Marr then asked again about the Bank of England’s U turn and in response Brown praised Mervyn King profusely. However when asked if he would be reappointed he ducked the question and just said “that’s a matter for ……..”
Perhaps he didn’t finish the sentence as he suddenly realised it was a matter for him or his Chancellor, which probably comes to the same thing.
Marr then asked about the Northern Rock management: “So far none of the senior people in charge (at Northern Rock) have gone. Would you like to see some heads roll?
True to form Brown ducked this question and so Marr followed up with: “You don’t think anything went wrong?” To which Brown amazingly answered “No”.
So now we know that queues outside Northern Rock branches were always part of the plan to save Northern Rock. Perhaps the idea was to save the bank but destroy as much shareholder value as possible in the process!
Marr asked again about the Bank of England’s U turn, this time with success. Marr said: “There was a U turn?”. Brown responded: “Yes, but I just look at it this way….”
Marr then moved on to the wider economy and said: “We have £1.4 trillion of private debt, which has happened on your watch. Do you accept any responsibility for the fact that we are such an indebted society?” Brown’s reply was: “That is because large numbers of people have been able to take mortgages and buy their homes for the first time.” Marr interjected: “and buy other things with mortgages too”. To which Brown responded: “But hold on, that is a good thing, not a bad thing.” He claimed that nearly 2m more people had become home owners since 1997 and again claimed that we have relatively low interest rates.
Fact: according to Hansard, in response to a question on 26 June this year from Mr Pickles, Yvette Cooper (the Housing Minister) gave detailed figures for the number of homeowners in England in the 10 years to 2006 and these showed an increase of only 1.1million, an average increase of 110,000 p.a., with the number actually falling in 2006. This compares with an increase of 4 million in the 18 years of the previous Tory rule, an average increase of 222,000 p.a., or double the figure brown was boasting about.
Brown then claimed “It was because the Government of the day was not good enough in dealing with these problems, was lax in dealing with these problems, that we had these repossessions and we had negative equity.
He is on firmer ground here as repossessions and negative equity were clearly a major problem in the first half of the 1990s, with repossessions peaking at 75,500 in 1991. However, his recent record here is nothing to boast about as, according to the CML, repossessions increased by 184% in the two years to 2006 and this trend is continuing, with the increase in the first half of 2007 compared to the first half of 2004 being over 350%. Repossessions this year will almost certainly be in excess of 30,000 and next year’s higher still.
He added “I do remember that in 1992 the person standing next to Norman Lamont is (sic) the current leader of the Conservative Party, David Cameron, who was the political adviser to Norman Lamont at that time.
Fact: The Exchange Rate Mechanism (ERM) fiasco was a humiliation for the Conservative Government, which was effectively forced to leave the ERM by a run on sterling, but nevertheless the decision to escape from the ERM in September 1992 was the right one and so if Cameron advised Lamont to do that he deserves to be congratulated, not pilloried. The adviser who should be castigated is whoever advised the then Chancellor, John Major, to join the ERM in October 1990!
Categories: Property market, Bank of England, Mortgages, House and home, Interest rates
The blog postings on this site solely reflect the personal views of the authors and do not neccessarily represent the views, positions, strategies or opinions of Charcol Limited. All comments are made in good faith, and neither Charcol Limited nor Ray Boulger will accept liability for them.
Post a Comment
Please keep your comments relevant. Charcol reserves the right to edit or delete comments.